PM Modi’s Steps To Save Economy From Hurting From Notes Ban

With indicators revealing a difficult end to Prime Minister Narendra Modi’s unprecedented cash clampdown, he’s turning to time-tested methods to cushion India’s economy. Lawmakers last week cleared about 600 billion rupees ($9 billion) in additional spending for the year through March, which includes a 10 percent increase in a rural jobs program Modi once mocked. Recent growth has been slower than estimated and data due Tuesday are expected to show that inflation slumped below the central bank’s target as Modi’s move dents demand. Public spending is needed because the cash ban will hit private investment, said J. Dennis Rajakumar, director of the Mumbai-based think tank EPW Research Foundation. “The employment guarantee program to some extent will help ease the rural crisis that the country is heading toward,” he said. Sustaining commerce in India’s cash-based hinterland is crucial for Modi before key state elections next year. Food prices are set to drop as his Nov. 8 move to scrap 86 percent of currency in circulation triggered distress sales of crops. Consumer prices probably rose 3.9 percent in November, according to the median of 32 estimates in a Bloomberg survey of economists before data due at 5:30 p.m. in New Delhi. That would be the slowest pace in 15 months and below the 4 percent mid-point of the Reserve Bank of India’s inflation target. Governor Urjit Patel kept interest rates unchanged at a six-year-low on Dec. 7 and lowered the full-year growth forecast. The Asian Development Bank on Tuesday cut its forecast for India’s 2016 gross domestic product expansion to 7 percent from 7.4 percent citing weak investment, a slowdown in agriculture and the cash shortages. Sales of two-wheeler vehicles fell 5.9 percent in November, the first decline since December 2015, according to the Society of Indian Automobile Manufacturers’ figures released last week.

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